EastGroup Properties (EGP) has outperformed many industrial/logistics REITs, driven by upbeat comments and lower leverage. The company operates in the Sunbelt states, focusing on flexible and quality space for location-sensitive customers. Over time, it has grown its portfolio to 59 million square feet, with a diversified tenant base. EastGroup has been a consistent dividend payer for 176 consecutive quarters and increased or maintained dividends for 31 years in a row.
Despite this growth, the company has diluted its shares by 45%, which has impacted growth on a per-share basis. However, the company has strong revenue growth, with 2023 revenues up 17% to $571 million. Funds from operations (FFO) per share are expected to increase to $8.17-$8.37 in 2024, driven by a similar percentage increase in net operating income.
While the REIT category and geographic focus are attractive, EastGroup’s valuation is demanding, especially considering the aggressive sell-off in peer companies. The implied yield on the company’s shares may expand in the future due to record re-leasing spreads. However, the company’s focus on absolute growth rather than growth per share, and the potential for share buybacks, raise concerns. A cautious approach is recommended despite the company’s strengths.
